Aussies offered sweetener for Abbey

ABBEY National was offered a very substantial premium to its current share price and a cash sweetener by suitor National Australia Bank, it emerged today, as bid talks between the two collapsed.

Talks over the summer were substantive and included the setting up of joint working parties to discuss potential merger savings. NAB officials reckoned £300m a year could have been squeezed from the combined business.

The negotiations broke down over the summer but were resurrected briefly within the past few weeks when Bank of Ireland's rival approach was being considered, it is understood.

NAB, led by Frank Cicutto, confirmed it had been in talks but had now walked away. 'The discussions regarding the National's proposal did not result in any agreement and have now ceased,' the NAB said in a statement to the Australian Stock Exchange.

The combination would have meant substantial job losses and probably some branch closures. NAB's Yorkshire Bank and Clydesdale Bank operations cost £700m, while Abbey's costs are about £3bn. Abbey confirmed it had been in talks with NAB. The two had spoken over a long period and 'thoughtful consideration' was given to the proposals, a spokesman said.

Responding to criticism that it should have alerted shareholders to the talks at the same time as it turned down BoI's approach on Tuesday, Abbey said: 'We've all along respected NAB's request not to make this public.'